States developed a number of strategies to best manage federal funding during the pandemic. Now, according to a new report from The Pew Charitable Trusts, “recent uncertainty surrounding federal funding for many programs is increasing the need for effective state management that can maximize existing federal dollars, reduce the effects of funding volatility on state budgets, and boost transparency for taxpayers.”

“Federal dollars made up a record high share of state budgets in the wake of the pandemic, says Rebecca Thiess, Manager of Pew’s Managing Fiscal Risks project.  “To better manage those funds, some states created new approaches and others built on existing innovations developed during previous downturns. As state budgets contract as pandemic aid expires and uncertainty around federal funds persists, this research highlights that states can apply lessons learned from previous approaches to maximize the use of ongoing and future federal funds.”

These approaches include “centralizing their efforts to comply with federal rules and guidance, creating technical assistance initiatives to help localities access and use funding, and building out data collection and reporting systems,” according to Pew.

A few approaches from the report:

• Hiring more staff with key skills. According to the report, “The Utah Governor's Office of Planning and Budget . . . expanded its workforce capacity to meet the challenge of administering pandemic dollars. The office scaled up a compliance monitoring program—hiring staff focused on oversight, building systems for records tracking, and training employees in grant management best practices.” 

• Leveraging consultants to help administer and manage funds, “For example, Michigan's COVID-19 Office of Accountability, created by executive directive early in the pandemic, worked with an external contractor to assess projects funded by the SLFRF [State and Local Fiscal Recovery Fund] to determine their federal audit risk. Then, depending on each project's risk level, the office and contractors provided agencies with support to reduce the likelihood of audit issues, ranging from general guidance to hands-on assistance completing required monitoring.”

• Increasing data collection and transparency. During the pandemic, “Centralized offices in many states used this data to publish funding progress and program reports on their websites, increasing the public visibility of how states spent the federal funds. When presented in easily understandable ways, publicly available data on how governments allocated and monitored funds can help to instill public confidence in the stewardship of funds and keeps both federal and state policymakers informed.”

Going forward, “several states are also establishing permanent centralized systems to better manage and pursue federal grant funds,” while “other states are coordinating their pursuit of federal funds.” In addition, “many states are using their centralized entities to sustain or increase valuable federal grant support for local governments.”

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